 About VA Loans
Why choose a VA Loan?
ENGLending.com offers affordable, easy-to-understand VA Home loans in recognition of the contributions and sacrifices veterans have made for America. Whether you're buying your first home, refinancing your existing mortgage, or thinking of building your one-of-a-kind dream house, ENG Lending is your ultimate Veteran's Affairs loans information center.
What are VA Loans?
VA guaranteed loans are made by private lenders, such as ENG Lending, to eligible veterans for the purchase of a home which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fail to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.
What are the benefits of a VA Loan?
There are many benefits of a VA Home Loan including:
- No down payment
- Ability to finance the VA funding fee
- Closing costs are comparable with other financing types (and may be lower).
- No mortgage insurance
- An assumable mortgage.
- Prepay without penalty.
- VA assistance to veteran borrowers in default due to temporary financial difficulty.
VA Loans have Great Interest Rates
A distinct advantage of a VA Loan, as compared to a conforming loan, is great interest rates, no down dayment and no mortgage insurance (MI).
VA Loans Require No Down Payment
VA Loans have no down payment requirement.
VA Loans Have No Mortgage Insurance
VA Loans have no monthly mortgage insurance up to 100% LTV.
What factors determine if I am eligible for a VA loan?
To decide if you qualify for a VA Loan, we will look at:
- Your income and your monthly expenses. VA uses two methods for income qualification purposes. The primary method of evaluating a veteran's income is the residual income method and a 41%
total debt to income ratio.
- Your credit history (this is important, but VA's credit standards are flexible). A FICO score of 620 is presently required for approval.
VA uses two methods for income qualification purposes. The primary method of evaluating a veteran's income is the residual income method. Under this method, the underwriter determines that a veteran has sufficient income to cover day-to-day living expenses after paying housing expenses, taxes, and other debts such as car payments and credit card payments. VA also uses a debt-to-income ratio method like many programs. However, VA uses only one ratio (41%) which is the ratio of total debt (both housing and other debt) to income.
Additionally, to meet current VA loan qualifications your military service must meet the following requirements:
Military Service Requirements for VA Loan Eligibility:
Note: Applications involving other than honorable discharges will usually require further development by VA. This is necessary to determine if the service was under other than dishonorable conditions.
Wartime - Service During:
- WWII: 9/16/1940 to 7/25/1947
- Korean: 6/27/1950 to 1/31/1955
- Vietnam: 8/5/1964 to 5/7/1975
You must have at least 90 days on active duty and been discharged under other than dishonorable conditions. If you served less than 90 days, you may be eligible if discharged for a service connected disability.
Peacetime - Service During:
- 7/26/1947 to 6/26/1950
- 2/1/1955 to 8/4/1964
- 5/8/1975 to 9/7/1980 (Enlisted)
- 5/8/1975 to 10/16/1981 (Officer)
You must have served at least 181 days of continuous active duty and been discharged under other than dishonorable conditions. If you served less than 181 days, you may be eligible if discharged for a service connected disability.
Service after 9/7/1980 (enlisted) or 10/16/1981 (officer):
If you were separated from service which began after these dates, you must have:
- Completed 24 months of continuous active duty or the full period (at least 181 days) for which you were ordered or called to active duty and been discharged under conditions other than dishonorable, or
- Completed at least 181 days of active duty and been discharged under the specific authority of 10 USC 1173 (Hardship), or 10 USC 1171 (Early Out), or have been determined to have a compensated service-connected disability;
- Been discharged with less than 181 days of service for a service-connected disability. Individuals may also be eligible if they were released from active duty due to an involuntary reduction in force, certain medical conditions, or, in some instances for the convenience of the Government.
Gulf War - Service during period 8/2/1990 to date yet to be determined
If you served on active duty during the Gulf War, you must have:
- Completed 24 months of continuous active duty or the full period (at least 90 days) for which you were called or ordered to active duty, and been discharged under conditions other than dishonorable, or
- Completed at least 90 days of active duty and been discharged under the specific authority of 10 USC 1173 (Hardship), or 10 USC 1173 (Early Out), or have been determined to have a compassable service-connected disability, or
- Been discharged with less than 90 days of service for a service-connected disability. Individuals may also be eligible if they were released from active duty due to an involuntary reduction in force, certain medical conditions, or, in some instances, for the convenience of the Government.
Active Duty Service Personnel
If you are now on regular duty (not active duty for training), you are eligible after having served 181 days (90 days during the Gulf War) unless discharged or separated from a previous qualifying period of active duty service.
Selected Reserves or National Guard
If you are not otherwise eligible and you have completed a total of 6 years in the Selected Reserves or National Guard (member of an active unit, attended required weekend drills and 2-week active duty for training) and
- Were discharged with an honorable discharge, or
- Were placed on the retired list, or
- Were transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve after service characterized as honorable service, or
- Continue to serve in the Selected Reserves
Individuals who completed less than 6 years may be eligible if discharged for a service-connected disability.
You may also be determined eligible if you:
- Are an un remarried spouse of a veteran who died while in service or from a service connected disability, or
- Are a spouse of a serviceperson missing in action or a prisoner of war
Note: Also, a surviving spouse who remarries on or after attaining age 57, and on or after December 16, 2003, may be eligible for the home loan benefit. However, a surviving spouse who remarried before December 16, 2003, and on or after attaining age 57, must apply no later than December 15, 2004, to establish home loan eligibility. VA must deny applications from surviving spouses who remarried before December 6, 2003 that are received after December 15, 2004.
Eligibility may also be established for:
- Certain United States citizens who served in the armed forces of a government allied with the United States in WW II.
- Individuals with service as members in certain organizations, such as Public Health Service officers, cadets at the United States Military, Air Force, or Coast Guard Academy, midshipmen at the United States Naval Academy, officers of National Oceanic & Atmospheric Administration, merchant seaman with WW II service, and others.
- Have a valid Social Security Number (SSN)
- Be legal resident of the United States
- Be of a legal age to sign on a mortgage in your state. There is no maximum age limit for a borrower.
What is the maximum amount that I can borrow?
The maximum loan amount for a VA Loan qualification is determined by:
Maximum VA loan amount: By law, VA Lenders cannot insure loans that exceed certain amounts based on the metropolitan area or county in which you live. The highest maximum VA mortgage right now is $1,094,625. The lowest VA lender maximum amount available in any county is $417,000. To see what the limit is in the county in which you're interested, visit the following site http://www.homeloans.va.gov/docs/2009_county_loan_limits.pdf. This site lists U.S. territories as well as states.
Maximum financing: The maximum VA Loan amount will be 100% of either the appraised value of the home or its selling price, whichever is lower. If you are refinancing and taking cash out, the loan will be limited to either 90% of the current appraised value.
How do VA loans compare to conventional loans?
Conventional loans require a larger down payment. And, if you have less than perfect credit you may not qualify for many conventional loans and find yourself being offered loans with higher interest rates and/or fees than you expected.
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